Large office landlord reaches deal to build its first residential building in the city August 10, 2016

Crains New York | August 10th 2016

RXR Realty, a firm known for its expansive collection of large office properties in the city , has reached a deal to develop its first residential building.

The firm purchased a leasehold of a parking lot at 810 Fulton St. in Brooklyn for $28.7 million and plans to erect a 12-story rental apartment building with roughly 33,000 square feet of ground-floor retail space.

The seller and previous owner of the leasehold on 810 Fulton St., GFI Development, had already obtained city approvals for development rights from a neighboring building, 470 Vanderbilt Ave., to be transferred to the site in order to build the residential project. In exchange for the additional air rights, the developer agreed to reserve 20% of the building’s 363 units for affordable housing.

GFI tapped Aufgang Architects to design the 328,000-square-foot property and broke ground on a portion of its foundation last year in order to qualify the project for 421-a property tax breaks, a program that expired at the beginning of the year.

RXR, which will take over GFI’s plans, will restart construction in the fall and expects to complete the project in late 2018 or early 2019. RXR said it will honor GFI’s pledge to include affordable housing. The building will cost about $200 million to develop and GFI will remain construction manager on the project.

Steven Hurwitz, GFI’s president, said GFI had contemplated building the property but saw an opportunity to profit in the deal with RXR and direct its focus to other projects it is working on in the city, including a Manhattan hotel it plans to upgrade on Madison Avenue and East 29th Street, and completing the Beekman, a new condo tower it is building in lower Manhattan that abuts a historic hotel it is refurbishing.

Although 810 Fulton St. is close to thousands of new rental and condo apartments being built in downtown Brooklyn, RXR is betting the building’s location at the juncture of three hot residential neighborhoods—Fort Greene, Clinton Hill and Prospect Heights—will be a draw to renters.

“As costs rise for commercial and residential space in core New York markets, this will create demand in new areas, such as Fort Greene and other emerging submarkets,” said Rechler in a statement. “We know that 810 Fulton will not only benefit from this trend, but, with its mix of first-class retail and residential space, will help to make this already attractive Brooklyn neighborhood even more attractive to renters from across the city.”

The project abuts a large office property at 470 Vanderbilt Ave. that RXR purchased a leasehold on two years ago, also from GFI, for nearly $200 million. The land under both properties is owned by the estate of Sol and Lillian Goldman. The leasehold allows RXR to control both properties for another 61 years in exchange for rental payments to the Goldman family, which will regain ownership of the properties when the ground leases expire in 2077. RXR will pay the same undisclosed rent to the Goldmans as GFI did.

Seth Pinsky, an executive vice president at RXR, said the firm saw opportunity in having residential and commercial office properties in such close proximity.

“We’re creating living space for just the kind of workforce that local companies want,” Pinsky said. “And conversely, the office space provides jobs that will be just a short walk away from the living space.”

While the development will be RXR’s first residential building in New York City, it is in the process of building 3,000 apartment units outside of the city on Long Island and in Westchester and Yonkers.

Correction: A 12-story rental apartment building will be built at 810 Fulton St. The height was misstated in an earlier version of this article.

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